On December 31, 2017, Belagio Holdings Ltd. issues 6 percent, 10-year convertible bonds with a maturity value of $6,000,000. The semi-annual interest dates are June 30 and December 31. The market interest rate is 5 percent and the issue price of the bonds is 107.79458. Belagio Holdings Ltd. amortizes any bond premium and discount by the effective-interest method.

Required

1. Prepare an effective-interest-method amortization table for the first four semi-annual interest periods.

2. Journalize the following transactions:

a. Issuance of the bonds on December 31, 2017. Credit Convertible Bonds Payable.

b. Payment of interest on June 30, 2018.

c. Payment of interest on December 31, 2018.

d. Retirement of bonds with maturity value of $3,000,000 on July 2, 2019. Belagio Holdings pays the call price of 104.00.

e. Conversion by the bondholders on July 2, 2019, of bonds with maturity value of $2,000,000 into 40,000 of Belagio Holdings Ltd. common shares.

3. Prepare the balance sheet presentation of the bonds payable that are outstanding at December 31, 2019.